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Compatibility of the tax regime of Alpha with the WTO rules.

Country Alpha applies an excise tax regime on alcoholic beverages which distinguishes between alcoholic beverages depending on the raw materials used in the distillation process. For the purpose of the excise tax, spirits are dived into four categories: 1) spirits obtained from fruit; 2) spirits obtained from cereals; 3) spirits obtained from wine; and 4) spirits obtained from sugar cane. The tax rates applicable to the four categories vary depending on the net resale price of a 750 ml bottle of the spirit in question. As a result, the different spirits are subject to the following tax: Spirits obtained from fruit: €3 Spirits obtained from cereals €4 Spirits obtained from wine: €7 Spirits obtained from sugar cane: €14 Country Beta, which is an important exporter of spirits obtained from sugar cane, is dissatisfied with the high taxes imposed on its products in Alpha and seeks your advice as to whether the tax regime of Alpha is compatible with the WTO rules. Both Alpha and Beta are WTO members. Beta also informs you that Alpha is producing spirits from fruit and cereals, whereas its production of spirits obtained from wine or sugar cane is insignificant. Please write a max 2-page brief advising your client on the compatibility of the tax regime of Alpha with the WTO rules.